SECURITY AGREEMENT

 EXHIBIT 10.15

                               

                               

                      SECURITY AGREEMENT
                               
                      Dated July 31, 1996
                               
                              by
                               
                     PANDA-ROSEMARY, L.P.
                               
                              to
                               
                     FLEET NATIONAL BANK,
                      as Collateral Agent
                               
                               

                               

                               

                               

                      SECURITY AGREEMENT
                               
                               
          This SECURITY AGREEMENT, dated July 31, 1996, is
made by PANDA-ROSEMARY, L.P., a Delaware limited partnership
(the "Grantor"), to FLEET NATIONAL BANK, a national banking
association established under the laws of the United States of
America, as collateral agent (in such capacity, together with
its successors, assigns and designees in such capacity, the
"Collateral Agent") for the benefit of the Secured Parties (as
defined herein).

                     W I T N E S S E T H :
                               
          WHEREAS, the Grantor owns a natural gas-fired
cogeneration facility with approximately 180 MW of electric
generating capacity located in Roanoke Rapids, North Carolina
(the "Project");

          WHEREAS, the Grantor has caused Panda-Rosemary
Funding Corporation, a Delaware corporation (the "Company") to
be formed as a wholly-owned subsidiary for the purposes of
facilitating the refinancing of the Project;

          WHEREAS, the Company has duly authorized the
creation and issuance of its First Mortgage Bonds to be issued
in one or more series (the "Bonds") pursuant to the Trust
Indenture, dated as of July 31, 1996 (as amended, restated,
supplemented or otherwise modified from time to time, the
"Indenture"), among the Grantor, the Company and Fleet
National Bank, as trustee;

          WHEREAS, the proceeds of the sale of the Bonds will,
together with other funds available to the Grantor, be used,
among other things, to refinance the Grantor's outstanding
indebtedness incurred in connection with the construction and
initial financing of the Project, to fund a debt service
reserve fund for the Bonds, to redeem a limited partner
interest in the Grantor, to pay certain transaction costs
associated with the offering of the Bonds and to fund certain
modification costs in the future, if necessary, some of the
foregoing being financed by the loan by the Company of the
proceeds from the issuance of the Bonds to the Grantor, which
loan, as well as loans by the Company to the Grantor with
respect to Additional Permitted Debt (as defined
below)(collectively, the "Loans"), will be secured by
substantially all the assets of the Partnership and certain
other collateral;

          WHEREAS, in order to satisfy certain requirements of
the Partnership under the Project Agreements (as defined in
the Indenture) and for other purposes permitted under the
Indenture, the Grantor may incur additional debt permitted by
Sections 6.16(a)(v) and 6.16(b)(ii) of the Indenture
("Additional Permitted Debt"), either directly or indirectly
through the Company, the obligations under which shall be
secured by substantially all the assets of the Grantor and
certain other collateral;

          WHEREAS, all of the Company's obligations under the
Bonds will be unconditionally guaranteed by the Grantor
pursuant to a guaranty of the Grantor, the performance of
which will be secured by substantially all the assets of the
Grantor;

          WHEREAS, the Grantor intends to arrange for the
issuance of certain letters of credit pursuant to one or more
Credit Bank Reimbursement Agreements (as defined in the
Indenture) and may finance certain working capital
requirements of the Project pursuant to one or more Credit
Bank Working Capital Agreements (as defined in the Indenture),
the obligations under which may be secured by substantially
all the assets of the Grantor and certain other collateral;

          WHEREAS, at the closing, certain moneys held by The
Fuji Bank and Trust Company, as collateral agent, in
connection with an existing letter of credit facility, will be
transferred into the appropriate Funds (as defined in a
certain Deposit and Disbursement Agreement, dated as of
July 31, 1996 (as amended, restated, supplemented or otherwise
modified from time to time, the "Depositary Agreement"), by
and among the Grantor, the Company, the Collateral Agent and
Fleet National Bank, as depositary agent thereunder (in such
capacity, together with its successors, assigns and designees
in such capacity, the "Depositary Agent"));

          WHEREAS, the Secured Parties signatories thereto
(the "Secured Parties"), the Grantor, the Company, the
Collateral Agent and the Depositary Agent have entered into a
Collateral Agency and Intercreditor Agreement, dated as of
July 31, 1996 (as amended, restated, supplemented or otherwise
modified from time to time, the "Intercreditor Agreement"),
appointing the Collateral Agent as collateral agent and
setting forth certain rights and obligations of the Collateral
Agent acting on behalf of the Secured Parties with respect to
the Collateral, including, without limitation, the Funds; and

          WHEREAS, the execution and delivery of this Security
Agreement (as amended, supplemented, restated or otherwise
modified from time to time, this "Security Agreement" or this
"Agreement") by the Grantor are conditions precedent to the
Collateral Agent and the Secured Parties entering into the
transactions contemplated by, among other things, the
Indenture and the Credit Bank Documents (as each such term is
defined in the Indenture).

          NOW, THEREFORE, in consideration of the premises and
in order to induce the Collateral Agent and the Secured
Parties to enter into the transactions contemplated by, among
other things, the Indenture and the Credit Bank Documents, the
Grantor hereby agrees with the Collateral Agent, for the
benefit of the Secured Parties, as follows:

          1.   Defined Terms.

          (a)  Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings set
forth in, and the interpretations applicable thereto, under
the Intercreditor Agreement (including the definitions in the
Indenture incorporated in the Intercreditor Agreement).
Unless otherwise specified herein, (i) all references to
Sections, paragraphs or other subdivisions herein are to this
Agreement and (ii) the words "include," "includes," and
"including" are deemed to be followed by "without limitation"
whether or not they are, in fact, followed by such words or
words of like import.  Unless otherwise defined herein or in
the Indenture, terms defined in Article 9 of the Uniform
Commercial Code as in effect from time to time in the State of
New York are used herein as therein defined.  The following
terms shall have the following meanings, unless the context
otherwise requires:

          "Accounts Receivable" means all accounts (as defined
in the Code) now or hereafter owned by the Grantor and in any
event shall include, but not be limited to, (i) accounts
receivable, instruments (as defined in the Code), documents,
contract rights (including any rights to liquidated damages
payments) and chattel paper (as defined in the Code), created
by or arising from sales of electricity, steam, output, fuel,
capacity or recoverable materials and/or thermal energy or
other services in connection with the Project, and all
accounts (as defined in the Code) arising from any sale or
rendition of services made under any trade name or style,
whether or not earned by performance, (ii) guarantees,
warranties, endorsements, indemnifications or collateral on,
of or for any of the foregoing and any rents, revenues, income
and profits in respect of the Site or the Project,
(iii) insurance policies or rights relating to any of the
foregoing, (iv) cash and non-cash Proceeds of any and all of
the foregoing and (v) all powers of attorney for the execution
of any evidence of indebtedness or security or other writings
in connection therewith.

          "Assigned Agreements" means those agreements set
forth in Schedule A hereto, as the same may be amended,
modified, restated, replaced, substituted or otherwise
supplemented from time to time.

          "Code" means the Uniform Commercial Code as the same
may from time to time be in effect in the State of New York.

          "Collateral" shall have the meaning set forth in
Section 2.

          "Collateral Records" means (a) all original copies
of all documents, instruments or other writings evidencing any
of the other Collateral and (b) all books, correspondence,
credit or other files and records.

          "Copyrights" means, collectively, all of the
following now owned or hereafter created or acquired by
Grantor:  (a) all copyrights, rights and interests in
copyrights, works protectable by copyright, copyright
registrations and copyright applications; (b) all renewals of
any of the foregoing; (c) all income, royalties, damages and
payments now or hereafter due and/or payable under any of the
foregoing or with respect to any of the foregoing, including,
without limitation, damages or payments for past or future
infringements of any of the foregoing; (d) the right to sue
for past, present and future infringements of any of the
foregoing; (e) all rights corresponding to any of the
foregoing throughout the world; and (f) all goodwill
associated with any symbolized by any of the foregoing.

          "Default Rate" means two percent (2%) in excess of
the "prime rate" from time to time publicly quoted by the
Collateral Agent in its individual capacity, or any successor
thereto.

          "Equipment" means any equipment or fixtures located
on the Site now or hereafter owned by the Grantor or used in
connection with the Project and, in any event, means and
includes, but shall not be limited to, all machinery,
packaging, processing, manufacturing, distribution, selling,
data processing, computer, office, furnishing, fixtures,
appliances, trade fixtures, vehicles, vessels, aircraft,
rolling stock, tools, tooling, molds, dies, supplies and other
equipment of any kind and nature, wherever situated, and any
and all additions, substitutions and replacements of any of
the foregoing, wherever located, together with all
attachments, components, parts, equipment, improvements,
upgrades and accessories installed thereon or affixed thereto
and all designs, plans and specifications relating to the Site
or the Project owned by Grantor on the date hereof or
hereafter acquired.

          "Excluded Collateral" means, collectively, the
collateral subject to (i) the LOC Security Agreement, dated as
of July 31, 1996, between the Grantor and NationsBank of
Texas, N.A., (ii) the Bond Security Agreement, dated as of the
same date, between the Partnership and The Bank of New York,
and (iii) the Forward Security Agreement, dated as of the same
date, between the Grantor and NationsBank of Texas, N.A., as
such agreements exist on the date hereof.

          "General Intangibles" means all general intangibles
now or hereafter owned by the Grantor, and, in any event,
means and includes, but shall not be limited to, all contract
rights, interests, choses in action, causes of action and all
other intangible personal property of the Grantor of every
kind and nature (other than Accounts Receivable), now owned or
hereafter acquired by the Grantor, including, without
limitation, corporate or other business records, loans and
other obligations receivable, inventions, designs, patents,
patent applications, service marks, service mark applications,
trademarks, trademark applications, trade names, trade
secrets, goodwill, registrations, licenses, leasehold
interests in real and personal property, franchises,
dealership agreements, customer lists, customer and supplier
contracts, firm sale orders, partnership and joint venture
interests, other contracts and contract rights, tax refund
claims, deposit accounts (general or special) with, and all
credits and claims against, any financial institution, rights
and claims against carriers and shippers, rights to
indemnification, all compensation, awards, damages, rights of
action and proceeds arising from any taking by any lawful
power and or authority by exercise of the right of
condemnation or eminent domain with respect to any of the
Collateral or the Project, reversionary interests in pension
and profit sharing plans and reversionary, beneficial and
residual interests in trusts, rights to proceeds of insurance
of which the Grantor is beneficiary, any letters of credit,
including, without limitation, guaranties, warranties,
security interests or liens of any kind held by or granted to
the Grantor to secure payment of any obligation owing by any
person or entity to the Grantor, and the like, however and
whenever arising and all pollution allowances, offsets and
similar rights, including, without limitation, all acid rain
allowances under the Clean Air Amendment of 1990 and any
implementing state Laws.

          "Insurance Policies" means all Proceeds of all
insurance policies in which the Grantor is named as owner or
beneficiary.

          "Inventory" means all of the Grantor's inventory (as
defined in the Code), goods, merchandise and other personal
property furnished or to be furnished under any contract of
service or intended for sale or lease, including, without
limitation, all raw materials, components, whole goods and
materials and supplies of any kind which are used or consumed
in the Grantor's business, and all documents of title or
documents representing the same, in each instance whether now
owned or hereafter acquired by the Grantor and wherever
located, whether in the possession of the Grantor or of a
bailee or other person for sale, storage, transit, processing,
use or otherwise.

          "Marks" means any trademarks, trademark
registrations and trademark applications pending, now held or
hereafter acquired by the Grantor including, without
limitation, registrations, recordings and applications of or
with the United States Patent and Trademark Office or any
similar agency in any foreign jurisdiction (which the Grantor
has adopted and used and is using or hereafter acquires or
under which the Grantor is licensed), as well as all other
trademarks, trade names, fictitious business names, business
names, company names, business identifiers, prints, labels,
trade styles and service marks not registered, and trade
dress, including logos and/or designs related to the
foregoing.

          "Money" means "money" as such term is defined in
Section 1-201(24) of the Code.

          "Obligations" means, (i) all obligations of the
Grantor or the Company to the Collateral Agent, the Depositary
Agent or the Secured Parties now or hereafter existing under
the Bonds, the Indenture, the Partnership Notes, the
Partnership Guarantee, any Additional Permitted Debt, any
Credit Bank Working Capital Agreement, any Credit Bank
Reimbursement Agreement, any Interest Rate Protection
Agreement, this Agreement or the Collateral Documents, whether
for principal, interest (including, without limitation,
interest accruing following the filing by or against the
Grantor or the Company of a bankruptcy petition, whether or
not allowed as a claim in a bankruptcy proceeding), fees,
indemnification, expenses or otherwise, and (ii) all other
liabilities, obligations, covenants and duties owing to the
Collateral Agent, the Depositary Agent or the Secured Parties
from or by the Grantor or the Company of any kind or nature,
present or future, whether or not evidenced by any note,
guaranty or other instrument, arising under, or in connection
with the Indenture, each Partnership Guarantee, the
Partnership Notes, any Additional Permitted Debt, any Credit
Bank Working Capital Agreement, any Credit Bank Reimbursement
Agreement, any Interest Rate Protection Agreements, the
Foreign Exchange Protection Agreement, this Agreement or the
Collateral Documents, whether or not for the payment of money,
whether direct or indirect (including those acquired by
assignment), joint or several, absolute or contingent,
liquidated or unliquidated, due or to become due, now existing
or hereafter arising, renewed or restructured, whether or not
from time to time decreased or extinguished and later
increased, created or incurred, and including, without
limitation, all indebtedness of the Grantor or the Company
under any instrument now or hereafter evidencing or securing
any of the foregoing and however acquired.

          "Patent" means any letter patent and any patent
registration and any patent application pending, including,
without limitation, registrations, recordings and applications
registered or recorded in the United States Patent and
Trademark Office or any similar agency in any foreign
jurisdiction in respect to which the Grantor has any rights
whatsoever.

          "Permits" means all applicable authorizations,
certificates, licenses, approvals, waivers, exemptions,
variances, franchises, permissions and permits of any
Governmental Authority required or obtained in connection with
the purchase, acquisition, design, construction, installation,
ownership and/or operation of the Project or in connection
with any transaction contemplated by the Indenture and the
Project Documents.

          "Proceeds" means all proceeds (as defined in the
Code) of any Collateral and, in any event, shall include,
without limitation, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Grantor from
time to time with respect to any of the Collateral, (ii) any
and all payments (in any form whatsoever) made or due and
payable to the Grantor from time to time in connection with
any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral or the Project
by any Governmental Authority (or any Person acting under
color of Governmental Authority), (iii) any and all other
amounts from time to time paid or payable under or in
connection with any of the Collateral or the Project and
(iv) any Proceeds of Proceeds.

          "Project Bank Deposits" means (i) the Funds (and any
sub-funds opened within any Fund) and each cash collateral
account established by the Depositary Agent, as agent for the
Collateral Agent for the benefit of the Secured Parties (and
designated by the Depositary Agent, as agent for the
Collateral Agent, as a Fund) on behalf of the Grantor or the
Company in connection with the Depositary Agreement, all sums
of money, from any source whatsoever, now or hereafter
transferred to and comprising the Funds, including, without
limitation, all credit balances therein, any and all funds,
cash, investments, instruments and securities at any time on
deposit in the Funds, and any and all interest and dividends
or other income derived from any such monies, credit balances,
funds, cash, investments, instruments and securities, (ii) all
statements, certificates, passbooks and instruments
representing the Funds and all other property from time to
time received, receivable or otherwise distributed in respect
of or in exchange for the Funds; and (iii) all deposits, cash,
notes, certificates of deposit or other instruments or
documents from time to time credited to the Funds for or on
behalf of the Grantor or the Company, and all additions
thereto and substitutions therefor, and all interest and
dividends thereon, including, without limitation, Permitted
Investments and Proceeds thereof.

          (b)  Any reference in this Agreement to a Project
Document or an Assignment Agreement shall include only such
documents that have been entered into and have not reached
their stated termination date (if any), have not been fully
and finally performed in accordance with their respective
terms or have not been replaced, terminated or canceled in
accordance with the terms of the Indenture or the
Intercreditor Agreement.

          2.   Assignment and Grant of Security.

         (i)   As collateral security for the prompt and
complete payment and performance when due (whether at stated
maturity, by redemption, acceleration or otherwise) of all of
the Obligations, the Grantor hereby assigns, pledges,
transfers, conveys and sets over to the Collateral Agent for
the benefit of the Secured Parties, and grants to the
Collateral Agent for the benefit of the Secured Parties a
security interest in and continuing lien on, all of its
estate, right, title and interest in, to and under the
following property of the Grantor, whether now owned or
existing or hereafter acquired or arising and wherever located
(all of which being herein collectively referred to as the
"Collateral"):

          (a)  the Assigned Agreements, including, without
     limitation, (i) all amounts and claims for amounts
     payable to or for the account of the Grantor under the
     Assigned Agreements, (ii) all claims, rights, privileges
     and remedies on the part of the Grantor, whether arising
     under the Assigned Agreements or by statute or at law or
     in equity or otherwise, arising out of or in connection
     with any failure by any party to any Assigned Agreement
     to make any payment assigned hereunder, including,
     without limitation, all claims of the Grantor for damages
     arising out of or for breach of or a default under the
     Assigned Agreements, (iii) all amounts payable by any
     party pursuant to any Assigned Agreement as a result of
     the exercise of any such claim, right, privilege or
     remedy, including all rights and claims of the Grantor
     under any bonding, insurance, indemnity, guarantee,
     warranty and liquidated damages arising out of or in
     connection therewith, (iv) all rights of the Grantor to
     take any action to terminate, amend, supplement, modify
     or waive performance of the Assigned Agreements, to
     perform thereunder and to compel performance thereunder,
     and (v) all rights of the Grantor to exercise any
     election or option or to give or receive any notice,
     consent, waiver or approval under or in respect of the
     Assigned Agreements, and the right (but not the
     obligation) to exercise or enforce any and all covenants,
     remedies, powers and privileges thereunder and to do any
     and all other things the Grantor is entitled to do
     thereunder together with full power and authority, in the
     name of the Grantor or otherwise, to enforce, collect,
     receive and give receipt for any and all of the
     foregoing;
     
          (b)  all Accounts Receivable;
     
          (c)  all Copyrights;
     
          (d)  all documents, instruments, letters of credit
     and chattel paper other than the Excluded Collateral;
     
          (e)  all Equipment;
     
          (f)  all General Intangibles;
     
          (g)  all goods;
     
          (h)  all Fuel Hedges and Interest Rate Protection
     Agreements;
     
          (i)  all Insurance Policies;
     
          (j)  all Inventory;
     
          (k)  all Marks;
     
          (l)  all Money other than the Excluded Collateral;
     
          (m)  all Patents;
     
          (n)  to the extent permitted by applicable law, all
     Permits owned by or granted to or for the benefit of the
     Grantor or the Project;
     
          (o)  all Project Bank Deposits and all deposits and
     accounts with other financial institutions other than the
     Excluded Collateral;
     
          (p)  any and all property in the possession of or
     under the control of the Collateral Agent or any Secured
     Party;
     
          (q)  all other tangible and intangible personal
     property other than the Excluded Collateral;
     
          (r)  all Collateral Records;
     
          (s)  all replacements, substitutions, additions or
     accessions to or for any of the foregoing;
     
          (t)  all Proceeds and products of any or all of the
     foregoing; and
     
          (u)  to the extent not included in the foregoing,
     all Permitted Investments (other than the Excluded
     Collateral) of the Grantor and proceeds, products and
     accessions of and to any and all of the foregoing
     Collateral, including, without limitation, "proceeds," as
     defined in Section 9-306(l) of the Code, including,
     without limitation, whatever is received upon any
     collection, exchange, sale or other disposition of any of
     the Collateral, and any property into which any of the
     Collateral is converted, whether cash or non-cash
     proceeds, and any and all other amounts paid or payable
     under or in connection with any of the Collateral.
     
          The assignment of the payments and rights provided
for in this Section 2 shall be effective immediately upon the
execution and delivery of this Agreement and shall not be
conditioned upon the occurrence of any default hereunder or of
any other contingency or event.

        (ii)   It is the intention of the parties hereto that
the description of the Collateral set forth in
Sections 2(i)(a) through 2(i)(u), above be sufficient to
enable the Collateral Agent, on behalf of the Secured Parties,
to take possession of, and foreclose upon, all of the right,
title and interest of the Grantor, if any, in and to the Site
and the Project and any and all real property and personal
property, tangible and intangible, used or usable in
connection therewith, and to enable the Collateral Agent or
its designee to operate, sell or otherwise dispose of the
entire interest of the Grantor, if any, in and to the Site and
the Project or any part thereof, in each case upon the
occurrence and during the continuance of an Event of Default
or a Trigger Event.

          3.   Delivery of Collateral; Perfection of Accounts;
Assigned Agreements.

          (a)  Delivery of Collateral.  All sums of money,
funds and cash, from time to time constituting the Collateral,
together with all certificates, instruments, investments and
securities representing or evidencing the Collateral, shall be
delivered to, dealt with and held by the Collateral Agent
pursuant to the terms of the Indenture and the terms hereof;
provided, that all such sums, certificates, investments,
securities or instruments representing or evidencing any Fund
shall be delivered to, dealt with and held by the Depositary
Agent, as agent for the Collateral Agent, for the benefit of
the Secured Parties.  All such certificates, investments,
securities and instruments shall be in suitable form for
transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form
and substance satisfactory to the Depositary Agent or the
Collateral Agent.

          (b)  Perfection of Accounts.  For the purpose of
perfecting the security interest of the Secured Parties in and
to the Funds and all funds, cash, investments, instruments and
securities at any time on deposit in the Funds, the Depositary
Agent shall be deemed to be holding the Funds and all such
funds, cash, investments, instruments and securities as agent
for the Collateral Agent and the Secured Parties.

          (c)  Assigned Agreements.  So long as no Event of
Default or a Trigger Event has occurred and is continuing, the
Grantor may exercise all of the Grantor's rights, powers,
privileges, elections, options and remedies under the Assigned
Agreements (including, without limitation, lending the
proceeds of any Additional Permitted Debt to the Partnership)
and any other contract or agreement included in the
Collateral, subject to the terms of the Indenture and the
other Project Documents.  Except as provided in Section 4,
upon the occurrence and during the continuance of an Event of
Default or a Trigger Event, the Collateral Agent may exercise
any right, remedy, election or option or give any notice,
consent, waiver or approval under, or deliver any requisition
for payment under, or take any other action in respect of, any
Assigned Agreement or other such agreement without any
approval of or action by the Grantor, but the Grantor will
nevertheless execute and deliver any instrument requested by
the Collateral Agent to be executed and delivered by the
Grantor in connection with the exercise by the Collateral
Agent of any such right, remedy, election or option or the
giving by the Collateral Agent of any such notice, consent,
waiver or approval or the taking by the Collateral Agent of
any such other action.

          4.   Rights and Duties of Grantor under Assigned
Agreements.  Notwithstanding any other provision of this
Agreement, the Grantor shall have the right, but not to the
exclusion of the Collateral Agent, to receive from the parties
to the Assigned Agreements all notices and other
communications and copies of all documents and all information
which such parties are permitted or required to give or
furnish to the Grantor.  The Grantor at its expense will
perform and comply with all of the terms of each Assigned
Agreement to be performed or complied with by it, will do all
things necessary on its part to maintain each Assigned
Agreement in full force and effect, will do all things
necessary to keep unimpaired all of its rights, powers and
remedies thereunder and to prevent any forfeiture or
impairment thereof, will enforce each Assigned Agreement in
accordance with its terms and will take all such action to
that end or to enforce any Assigned Agreement as from time to
time may be requested by the Collateral Agent, except as
otherwise expressly limited under or permitted by, or to the
extent that the failure to so do would not result in an Event
of Default under, the Indenture.

          5.   Grantor Remains Liable.  Anything herein to the
contrary notwithstanding, except to the extent expressly
limited under or permitted by, or to the extent that the
failure to so do would not result in an Event of Default
under, the Indenture and except as set forth in the next
succeeding sentence, the Grantor shall remain liable under the
Assigned Agreements and the other contracts and agreements
included in the Collateral to the extent set forth therein and
shall perform all of its duties and obligations thereunder to
the same extent as if this Agreement had not been executed.
The exercise by the Collateral Agent of any of its rights
hereunder shall not release the Grantor from any of its duties
or obligations under the Assigned Agreements and the other
contracts and agreements included in the Collateral, except in
the event of foreclosure upon the Collateral (and only to the
extent of such foreclosure on the particular items of
Collateral) by the Collateral Agent, the exercise by the
Collateral Agent of its rights to sell the Collateral or the
conveyance of the Collateral by the Collateral Agent in lieu
of foreclosure, in which event the Grantor shall be released
from obligations arising under the Assigned Agreements and the
other contracts and agreements constituting Collateral after
such event (but only to the extent such obligations arise
after such exercise of rights).  Neither the Collateral Agent
nor any of the Secured Parties shall have any obligation or
liability under any of the Assigned Agreements or other
contracts and agreements included in the Collateral by reason
of or arising out of this Agreement or the receipt of any
payment relating to the Assigned Agreements or any other
Collateral pursuant hereto (except as provided under the first
sentence of Section 9-207(l) of the Code), nor shall the
Collateral Agent or any of the Secured Parties be obligated to
perform any of the obligations or duties of the Grantor
thereunder, to make any payment required thereunder, to make
any inquiry as to the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim or to take any action
to collect or enforce any claim for payment assigned
hereunder.

          6.   Representations and Warranties.  The Grantor
hereby makes the following representations and warranties,
which shall survive the Closing Date:

          (a)  The Grantor has good, marketable and valid
title in and to all of the Collateral, free and clear of all
Liens, rights or claims of all other Persons, other than
Permitted Liens, and the Grantor has full power and authority
to grant the liens and security interests in and to the
Collateral hereunder.  The Grantor has full power and
authority to own its property and to carry on its business as
now being conducted and as proposed to be conducted.

          (b)  No security agreement, financing statement,
mortgage, equivalent security or lien instrument or
continuation statement covering all or any part of the
Collateral is on file or of record in any public office,
except for the financing statements filed by the Grantor in
the public offices listed on Schedule B hereto or as otherwise
permitted by the Indenture.

          (c)  Appropriate financing statements or other
appropriate instruments have been or will be filed pursuant to
the Code in the public offices listed on Schedule A attached
hereto as may be necessary to perfect any security interest
granted or purported to be granted hereby (to the extent such
security interest may be perfected by the filing of a
financing statement) and no other filings are necessary to
perfect the security interests granted herein, except for
Copyrights, Marks and Patents registered or otherwise located
outside of the United States.  Upon the Grantor's execution
and delivery of this Security Agreement, the Collateral Agent,
on behalf of the Secured Parties, will have a valid and
continuing Lien on and, upon (i) the filing of appropriate
financing statements in the public offices listed on
Schedule B attached hereto and (ii) the taking of possession
by the Collateral Agent of the Collateral in which a security
interest is perfected by possession, perfected security
interest in the Collateral, except for Copyrights, Marks and
Patents registered or otherwise located outside of the United
States, superior and prior to all other Liens and security
interests, existing or future (except for Permitted Liens) and
the security interests herein granted shall be enforceable as
such against creditors of and purchasers from the Grantor
(except for Permitted Liens) and against any owner or
mortgagee of the real property where any of the Collateral is
located and against any purchaser of real property and any
present or future creditor obtaining a Lien on such real
property, except to the extent otherwise expressly permitted
by the Indenture.  All action that can be taken by the Grantor
necessary or desirable to protect and perfect such Lien on and
security interest in each item of the Collateral, except for
Copyrights, Marks and Patents registered or otherwise located
outside of the United States, has been or will be duly taken
and the Grantor shall defend the Collateral against all claims
and demands of all Persons at any time claiming the same or
any interest therein adverse to the Collateral Agent.

          (d)  The principal place of business and the chief
executive office of the Grantor is located at 4100 Spring
Valley Road, Suite 1001, Dallas, Texas 75244.  The originals
of the Collateral Records are located at the chief executive
office of the Grantor.  All Accounts Receivable and Assigned
Agreements (other than those in the possession of the
Collateral Agent) are maintained at, and controlled and
directed, including, without limitation, for general
accounting purposes, from the chief executive office of the
Grantor.

          (e)  On the date each Account Receivable is created,
each such Account Receivable (i) is and thereafter will be the
genuine, legal, valid and binding obligation of the account
debtor in respect thereof, representing an unsatisfied
obligation of such account debtor, (ii) is and thereafter will
be enforceable in accordance with its terms, (iii) is not and
thereafter will not be subject to any setoff, defense, tax or
counterclaim (except (x) with respect to refunds, defenses,
returns and allowances in the ordinary course of business,
(y) to the extent that such Account Receivable may not yet
have been earned by performance and (z) common law rights of
setoff or other rights, defenses or counterclaims arising by
application of law as the result of contracts or agreements
between the Grantor and an account debtor and under which the
Grantor may owe an obligation) and (iv) is and will be in
compliance with all applicable laws, whether federal, state,
local or foreign.  None of the account debtors in respect of
any Account Receivable is the government of the United States
or an instrumentality thereof.  No Accounts Receivable which
are evidenced by chattel paper require the consent of the
account debtor in respect thereof in connection with their
assignment hereunder (other that such as to which required
consents have been obtained).

          (f)  The correct name of the Grantor is Panda-
Rosemary, L.P. and the Grantor has conducted business only
under that name and the name Panda-Rosemary Limited
Partnership.  The Grantor does not have any other corporate,
partnership, trade or fictitious name.

          (g)  All Inventory now or from time to time included
in the Collateral is kept only at the Site or at such
locations as may be designated by the Grantor from time to
time pursuant to and subject to the terms and conditions of
Section 7(d) hereof.  None of such Inventory is in the
possession of an issuer of a negotiable document (as defined
in Section 7-104 of the Uniform Commercial Code) therefor or
otherwise in the possession of a bailee.

          7.   Affirmative Covenants.  The Grantor covenants
and agrees with the Collateral Agent for the benefit of the
Secured Parties that from and after the date hereof and until
the Debt Termination Date:

          (a)  Further Documentation, Pledge of Instruments.
At any time and from time to time, upon the request of the
Collateral Agent and at the sole expense of the Grantor, the
Grantor will promptly execute and deliver any and all such
further instruments and documents and take such further action
as the Collateral Agent may deem desirable in order to obtain
the full benefits of this Security Agreement and of the rights
and powers granted or purported to be granted hereby,
including, without limitation, (i) the filing of any financing
or continuation statements under the Uniform Commercial Code
in effect in any jurisdiction necessary or advisable (in the
Collateral Agent's sole discretion) to perfect, or to maintain
the perfection of, the liens and security interests granted
hereby, and (ii) placing the interest of the Collateral Agent
as lien holder on the certificate of title of any vehicle.
The Grantor also hereby authorizes the Collateral Agent to
file any such financing or continuation statement without the
signature of the Grantor to the extent permitted by applicable
Law.  A photocopy or other reproduction of this Agreement
shall be sufficient as a financing statement and may be filed
in lieu of the original to the extent permitted by applicable
Law.  The Grantor will pay or reimburse the Collateral Agent
for all filing fees and related expenses (including reasonable
attorneys' fees) and will make or reimburse the Collateral
Agent for making all searches deemed reasonably necessary by
the Collateral Agent to establish and determine the priority
of the security interests of the Collateral Agent or to
determine the presence or priority of other secured parties.
If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any chattel paper
or any promissory note or other instrument, such chattel
paper, promissory note or instrument shall be immediately
pledged and delivered to the Collateral Agent for the benefit
of the Secured Parties hereunder, duly endorsed in a manner
satisfactory to the Collateral Agent.

          (b)  Maintenance of Records.  The Grantor will keep
and maintain, at its chief executive office and at its own
cost and expense, complete records of the Collateral
including, without limitation, a record of all payments
received and all credits granted with respect to Assigned
Agreements and Accounts Receivable and all other dealings with
the Collateral, including, without limitation, Collateral
Records.  The Grantor will mark its Collateral Records and any
chattel paper held by the Grantor to evidence this Agreement
and the security interests granted hereby.

          (c)  Further Identification of Collateral.  The
Grantor will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing
the Collateral and such other reports in connection with the
Collateral as the Collateral Agent or any Secured Party
(through the Collateral Agent) may request, all in reasonable
detail and in form satisfactory to the Collateral Agent.

          (d)  Continuous Perfection.  The Grantor will not
change its corporate structure, principal place of business,
chief executive office, name or identity in any manner or use
any fictitious or trade names without obtaining the express
prior written consent of the Collateral Agent and without
taking, at the Grantor's own expense, all actions necessary or
reasonably requested by the Collateral Agent in order to
continue the perfection and priority of the Liens and security
interests in the Collateral created and intended to be created
by this Security Agreement.  The Inventory will continue to be
located and kept at the Site, and the Grantor will not remove
any part of the Inventory from the Site without the prior
written consent of the Collateral Agent.

          (e)  Letters of Credit.  Upon receipt by the Grantor
of any letter of credit naming it as beneficiary and
constituting Collateral hereunder, the Grantor shall
(i) pledge and deliver the original of such letter of credit
to the Collateral Agent, (ii) if such letter of credit is
transferable, cause such letter of credit to be transferred
into the name of the Collateral Agent and (iii) if such letter
of credit is non-transferable, either use its best efforts to
cause the letter of credit to be re-issued with the Collateral
Agent to be named the sole beneficiary under such letter of
credit or use its best efforts to cause such letter of credit
to be reissued in transferable form.  The Grantor shall do all
things necessary to cause each such letter of credit not
theretofore transferred to be drawn upon when available in
accordance with its terms and to cause all proceeds thereof to
be paid directly into the Funds as provided in the Depositary
Agreement.

          (f)  Right of Inspection.  Upon reasonable notice
and at such reasonable times as the Collateral Agent or any
Secured Party shall reasonably request, the Collateral Agent
and the other Secured Parties shall have full and free access
during normal business hours to all the books, correspondence
and records of the Grantor relating to the Collateral and the
Collateral Agent and the other Secured Parties and their
respective representatives may examine the same, take extracts
therefrom and make photocopies thereof, and the Grantor agrees
to render to the Collateral Agent and the other Secured
Parties, at the Grantor's cost and expense, such clerical and
other assistance as may be reasonably requested with regard
thereto.  The Collateral Agent and the other Secured Parties
and their respective representatives shall at all times, upon
reasonable notice, also have the right to enter into and upon
any premises where any of the Inventory is located for the
purpose of inspecting the same, observing its use or otherwise
protecting its interests therein.

          (g)  Notice of Adverse Claims.  The Grantor shall,
promptly and in no event later than five (5) days after the
Grantor becomes aware of any information or has knowledge of
any claim against the Collateral adverse to the interest of
the Secured Parties, deliver to the Collateral Agent notice of
each such claim.

          (h)  Warehouse Receipts.  The Grantor agrees that if
any warehouse receipt or receipt in the nature of a warehouse
receipt or other document is issued with respect to any of its
Inventory, such warehouse receipt or receipt in the nature
thereof or other document shall not be "negotiable" (as such
term is used in Section 7-104 of the Uniform Commercial Code
or under other relevant law) or, if "negotiable", shall be
delivered promptly to the Collateral Agent as Collateral
hereunder.

          (i)  Maintenance of Properties.  Except as otherwise
permitted under the Indenture, the Grantor shall do or cause
to be done, all things necessary to preserve and keep in full
force and effect its existence and its Patents, Marks,
Copyrights and franchises which are necessary for the
ownership and operation of the Project.

          8.   Negative Covenants.  The Grantor covenants and
agrees with the Collateral Agent, for the benefit of the
Secured Parties, that from and after the date hereof and until
the Debt Termination Date:

          (a)  No Impairment.  The Grantor will not take or
permit to be taken any action which could impair the
Collateral Agent's rights in the Collateral.

          (b)  Negative Pledge.  The Grantor will not create,
incur or permit to exist, will defend the Collateral and all
of the Grantor's right, title and interest thereto against,
and will take such other action as is necessary to remove, any
Lien or claim on or to the Grantor's right, title or interest
in, to or under the Collateral, other than the Liens created
hereby and other than the Permitted Liens, and will defend the
right, title and interest of the Collateral Agent in and to
any of the Collateral against the claims and demands of all
Persons whomsoever.

          (c)  Modification of Terms of Accounts Receivable.
Except as may be otherwise permitted under, or would not
result in an Event of Default under, the Indenture, the
Grantor shall not rescind or cancel any indebtedness evidenced
by any Accounts Receivable or modify any term thereof or make
any adjustment with respect thereto, or extend or renew the
same, or compromise or settle any dispute, claim, suit or
legal proceeding relating thereto, or sell any Accounts
Receivable or interest therein, without the prior written
consent of the Collateral Agent.  The Grantor will duly
fulfill all obligations on its part to be fulfilled under or
in connection with the Accounts Receivable and will do nothing
to impair the rights of the Secured Parties in the Accounts
Receivable.

          (d)  Collection of Accounts Receivable.  The Grantor
shall endeavor to cause to be collected from the account
debtor named in each of its Accounts Receivable, as and when
due (in accordance with generally accepted collection
procedures in accordance with all applicable laws), any and
all amounts owing under or on account of such Accounts
Receivable, and apply forthwith upon receipt thereof all such
amounts as are so collected to the outstanding balance of such
Accounts Receivable.  The costs and expenses (including,
without limitation, attorneys' fees) of collection, whether
incurred by the Grantor or the Collateral Agent, shall be
borne by the Grantor.

          9.   Appointment of Collateral Agent as Attorney-in-
Fact.

          (a)  The Grantor hereby irrevocably constitutes and
appoints the Collateral Agent and any officer or agent
thereof, with full power of substitution, as its true and
lawful attorney-in-fact, with full irrevocable power and
authority in the place and stead of the Grantor and in the
name of the Grantor or in its own name, from time to time,
after an Event of Default has occurred and so long as it is
continuing, in its sole discretion, to take any and all
appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish
the purposes of this Agreement or cause performance or
compliance with the terms of this Agreement and, without
limiting the generality of the foregoing, hereby gives the
Collateral Agent the power and right, on behalf of the
Grantor, without notice to or assent by the Grantor, to do the
following:

            (i)  to pay or discharge taxes, Liens,
     security interests or other encumbrances levied or
     placed on or threatened against the Collateral, to
     effect any repairs or any insurance called for by
     the terms of the Indenture or the other Project
     Documents and to pay all or any part of the
     premiums therefor and the costs thereof;
     
           (ii)  to require, demand, receive and give
     acquittance for any sums of money due or received
     in connection with the Assigned Agreements or any
     other Collateral, to exercise the rights, powers
     and remedies relating thereto, to take possession
     of and endorse and collect any checks, drafts,
     notes, acceptances or other instruments or orders
     in connection therewith or to file any claims or
     take any action or institute any proceedings which
     the Collateral Agent may deem to be necessary or
     advisable and to exercise any election or option
     or give any notice, consent, waiver or approval
     under, or deliver any requisition for payment
     under, or take any other action in respect of, any
     of the Assigned Agreements;
     
          (iii)  to prepare, sign and file any
     financing statement in the name of the Grantor as
     debtor; and
     
           (iv)  (A) to direct any party liable for any
     payment under any Collateral to make payment of
     any and all monies due or to become due thereunder
     directly to the Collateral Agent (or to any Person
     as the Collateral Agent may direct), (B) to ask,
     demand, collect, receive and give acquittance and
     receipts for any and all monies due and to become
     due under, arising out of, in respect of, or in
     connection with any Collateral and, in the name of
     the Grantor or its own name or otherwise, to take
     possession of and endorse and collect any checks,
     drafts, notices, acceptances or other instruments
     for the payment of monies due under any
     Collateral, (C) to sign and endorse any invoice,
     freight or express bill, bill of lading, storage
     or warehouse receipt, draft against a debtor,
     assignment, verification and notice in connection
     with accounts and other documents relating to the
     Collateral, (D) to commence and prosecute any
     suits, actions or proceedings at law or in equity
     in any court of competent jurisdiction or to take
     any other action deemed appropriate by the
     Collateral Agent to enforce any Assigned Agreement
     or to collect the Collateral or any portion
     thereof or any amounts due thereunder whenever
     payable and to enforce any other right in respect
     of any Collateral, (E) to defend any suit, action
     or proceeding brought against the Grantor with
     respect to any Collateral, (F) to settle,
     compromise or adjust any suit, action or
     proceeding described above and, in connection
     therewith, to give such discharges or releases as
     the Collateral Agent may deem appropriate, and (G)
     generally to sell, transfer, pledge, make any
     agreement with respect to or otherwise deal with
     any of the Collateral as fully and completely as
     though the Collateral Agent was the absolute owner
     thereof for all purposes, and to do, at the
     Collateral Agent's option and the Grantor's
     expense, at any time, or from time to time, all
     acts and things which the Collateral Agent deems
     necessary to protect, preserve or realize upon the
     Collateral and the Collateral Agent's security
     interest therein in order to effect the intent of
     this Agreement, all as fully and effectively as
     the Grantor might do.
     
The Grantor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof.  This power
of attorney is a power coupled with an interest and shall be
irrevocable so long as any of the Collateral is subject to the
security interest granted hereunder.  The Collateral Agent
shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and
neither it nor any of its officers, directors, employees or
agents shall be responsible to the Grantor or any Partner for
any act or failure to act hereunder, except for its or their
own gross negligence or willful misconduct.

          (b)  The Grantor hereby acknowledges and agrees that
the Collateral Agent shall have no duties as fiduciary or,
except as expressly provided in the Code, otherwise to the
Grantor, and the Grantor hereby waives any claims to the
rights of a beneficiary or a fiduciary relationship hereunder.

          (c)  Upon the occurrence of an Event of Default or a
Trigger Event, the Grantor also authorizes the Collateral
Agent (i) to communicate in its own name with any party to any
contract, agreement or instrument included in the Collateral
with regard to the assignment of such contract, agreement or
instrument and other matters relating to such assignment and
(ii) to execute, in connection with any foreclosure or sale
provided for in this Agreement, any endorsement, assignment,
bill of sale or other instrument of conveyance or transfer
with respect to the Collateral on behalf of Grantor.

          (d)  The powers conferred on the Collateral Agent
hereunder are solely to protect the Collateral Agent's
interests in the Collateral and shall not impose any duty upon
it to exercise any such powers.  The Collateral Agent shall be
accountable only for amounts that it actually receives as a
result of the exercise of such powers.

          (e)  Anything herein to the contrary
notwithstanding, the Grantor shall remain liable under the
Project Documents to which it is a party to the extent set
forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not
been executed.  The exercise by the Collateral Agent of any
right or remedy hereunder shall not release the Grantor from
any of its duties or obligations under the Project Documents
to which it is a party, except in the event of foreclosure
upon the Collateral (and only to the extent of such
foreclosure on the particular Collateral).  All of the
Collateral is hereby assigned to the Collateral Agent solely
as security and the Collateral Agent shall have no duty,
liability or obligation whatsoever with respect to any of the
Collateral unless the Collateral Agent so elects consistent
with its rights under this Agreement.

          10.  Performance by the Collateral Agent of the
Grantor's Obligations.  If the Grantor fails to perform or
comply with any agreement contained herein, the Collateral
Agent shall be authorized (but in no event required) in its
sole discretion to so perform or comply or to cause such
performance or compliance for the Grantor's benefit and
account, and the reasonable expenses (including reasonable
attorneys' fees) of the Collateral Agent incurred in
connection with such performance or compliance, together with
interest thereon at the Default Rate, shall be payable by the
Grantor to the Collateral Agent on demand and shall constitute
a part of the Obligations secured hereby.

          11.  Remedies Upon Event of Default.

          (a)  If any Event of Default or a Trigger Event
shall occur and be continuing, the Collateral Agent may
exercise, in addition to all other rights and remedies granted
to the Collateral Agent in this Agreement and in any other
Project Document or other instrument or agreement securing,
evidencing or relating thereto, all rights and remedies of a
secured party under the Code and shall have all rights now or
hereafter existing under all other applicable Laws.  No
enumeration of rights in this Section 11 or elsewhere in this
Security Agreement or in any other Project Document or other
agreement shall be deemed to in any way limit the rights of
the Collateral Agent as described in this Section.  Without
limiting the generality of the foregoing, the Grantor
expressly agrees that in any such event the Collateral may be
sold or otherwise disposed of in one or more parcels at one or
more public or private sales conducted by any officer or agent
of, or auctioneer or attorney for, the Collateral Agent, at
any exchange or broker's board or at the Collateral Agent's
place of business or elsewhere, for cash, upon credit or for
other property, for immediate or future delivery, and at such
price or prices and on such terms as the Collateral Agent
shall, in its sole discretion, deem commercially reasonable.
The Collateral Agent or any Secured Party may be the purchaser
of any or all of the Collateral so sold at a public sale and
thereafter hold the same absolutely free from any right or
claim of whatsoever kind.  The Collateral Agent may, in its
sole discretion, at any such sale restrict the prospective
bidders or purchasers as to their number, nature of business
and investment intention.  Upon any such sale the Collateral
Agent shall have the right to deliver, assign and transfer to
the purchaser thereof (including the Collateral Agent or any
Secured Party) the Collateral so sold.  Each purchaser
(including the Collateral Agent or any Secured Party) at any
such sale shall hold the Collateral so sold absolutely free
from any claim or right of whatsoever kind, including any
equity or right of redemption of the Grantor, and the Grantor
hereby specifically waives, to the full extent it may lawfully
do so, all rights of redemption, stay or appraisal which it
has or may have under any rule of law or statute now existing
or hereafter adopted.  The Collateral Agent shall give the
Grantor at least ten (10) days' written notice (which the
Grantor agrees is reasonable notification within the meaning
of Section 9-504(c) of the Code) of any such public or private
sale.  Such notice shall state the time and place fixed for
any public sale and the time after which any private sale is
to be made.  Any such public sale shall be held at such time
or times within ordinary business hours as the Collateral
Agent shall fix in the notice of such sale.  At any such sale,
the Collateral may be sold in one lot as an entirety or in
separate parcels.  The Collateral Agent shall not be obligated
to make any sale pursuant to any such notice.  The Collateral
Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for such sale
and any such sale may be made at any time or place to which
the same may be so adjourned without further notice or
publication.  In the case of any sale of all or any part of
the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Collateral Agent
until the full selling price is paid by the purchaser thereof,
but the Collateral Agent shall not incur any liability in case
of the failure of such purchaser to take up and pay for the
Collateral so sold, and, in case of any such failure, such
Collateral may again be sold pursuant to the provisions
hereof.  In the payment of the purchase price of the
Collateral, the purchaser shall be entitled to have credit on
account of the purchase price thereof of amounts owing to such
purchaser on account of any of the Obligations and any such
purchaser may deliver notes, claims for interest or claims for
other payment with respect to such Obligations in lieu of cash
up to the amount which would, upon distribution of the net
proceeds of such sale, be payable thereon.  Such notes, if the
amount payable hereunder shall be less than the amount due
thereon, shall be returned to the holder thereof after being
appropriately stamped to show partial payment.

          (b)  Instead of exercising the power of sale
provided in Section 11(a), the Collateral Agent may proceed by
a suit or suits at law or in equity to foreclose the security
interest under this Agreement and sell the Collateral or any
portion thereof under a judgment or decree of a court or
courts of competent jurisdiction.

          (c)  The Collateral Agent and the Secured Parties
shall incur no liability as a result of the sale of the
Collateral, or any part thereof, at any private sale conducted
in a commercially reasonable manner.  The Grantor hereby
waives, to the full extent permitted by applicable law, all
claims, damages and demands against the Collateral Agent
arising out of the repossession, retention or sale of the
Collateral, including, without limitation, any claim against
the Collateral Agent arising by reason of the fact that the
price at which the Collateral, or any part thereof, was sold
was less than may have been obtained at a public sale or was
less than the aggregate amount of the Obligations, even if the
Collateral Agent accepts the first offer received which the
Collateral Agent in good faith deems to be commercially
reasonable under the circumstances and does not offer the
Collateral to more than one offeree.

          (d)  No sale or other disposition of all or any part
of the Collateral by the Collateral Agent pursuant to this
Section 11 shall be deemed to relieve the Grantor or the
Company of its obligations in respect of any Obligations
except to the extent the proceeds thereof are applied by the
Collateral Agent to the payment of such Obligations and except
to the extent provided in Section 11(a).

          (e)  The Grantor agrees to pay all costs of the
Collateral Agent, including all reasonable attorneys' fees and
legal expenses, incurred with respect to the collection of any
of the Obligations and the enforcement of any of its rights
hereunder.

          (f)  The proceeds of any Collateral obtained or
disposed of pursuant hereto shall be applied to the payment of
the Obligations as set forth in the Intercreditor Agreement
and the Depositary Agreement.

          12.  Discontinuance of Proceedings.  In case the
Collateral Agent shall have instituted any proceeding to
enforce any right, power or remedy under this Security
Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any
reason or shall have been determined adversely to the
Collateral Agent, then and in every such case, subject to the
terms of any judgment rendered in any such proceeding, the
Grantor and the Collateral Agent shall be returned to their
former positions and rights hereunder with respect to the
Collateral subject to the security interest created under this
Security Agreement and all rights, remedies and powers of the
Collateral Agent shall continue as if no such proceeding had
been instituted.

          l3.  Notices.  All notices, requests and demands to
or upon the respective parties hereto shall be effective as
provided in the Indenture.

          14.  The Collateral Agent's Duties.  The powers
conferred on the Collateral Agent and the Secured Parties
hereunder are solely to protect its and the Secured Parties'
interest in the Collateral and shall not impose any duty on it
or them to exercise any such powers.  The Collateral Agent
shall have no duty as to any Collateral (except to the extent
expressly provided in the first sentence of Section 9-207(11)
of the Code) or as to the taking of any necessary steps to
preserve rights against prior parties pertaining to any
Collateral.  Neither the Collateral Agent nor any of its
directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon all or any part of
the Collateral or for any delay in doing so or shall be under
any obligation to sell or otherwise dispose of any Collateral
upon the request of the Grantor or otherwise.  When Collateral
is in the Collateral Agent's possession, the risk of
accidental loss or damage shall be on the Grantor.

          15.  Limitation on the Duty of Collateral Agent in
Respect of Collateral.  The Collateral Agent shall be deemed
to have exercised reasonable care as to any Collateral in its
possession or control if such Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords
its own property.

          16.  Severability.  In case any provision in or
obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or
of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

          l7.  No Waiver, Remedies Cumulative.  No failure or
delay on the part of the Collateral Agent or the Secured
Parties in exercising any right, power or privilege under this
Agreement and no course of dealing between the Grantor and the
Collateral Agent or any Secured Party shall operate as a
waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under this Agreement preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder.  The rights and
remedies herein expressly provided are cumulative and not
exclusive of any right or remedy which the Collateral Agent or
any Secured Party would otherwise have.  No notice to or
demand on the Grantor in any case shall entitle the Grantor to
any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the
Collateral Agent or any Secured Party to any other or further
action in any circumstances without notice or demand.  The
Collateral Agent or any Secured Party shall not by any act,
delay, omission or otherwise be deemed to have waived any of
its rights or remedies hereunder and no waiver shall be valid
unless in writing, signed by the Collateral Agent or Secured
Party as to which such waiver is to be enforced, and then only
to the extent therein set forth.  A waiver by the Collateral
Agent of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which
the Collateral Agent would otherwise have or have had on any
other occasion.

          18.  Amendments, etc.  No amendment or waiver of any
provision of this Agreement, nor any consent to any departure
by the Grantor herefrom, shall in any event be effective
unless the same shall be in writing and signed by the
Collateral Agent and the Grantor and, with respect to any such
waiver or consent, such waiver or consent shall be effective
only in the specific instance and for the specific purpose for
which given.

          l9.  Successors and Assigns; Governing Law;
Submission to Jurisdiction.

          (a)  This Agreement and all obligations hereunder
shall be binding upon the successors and assigns of the
Grantor and shall inure, together with the rights and remedies
of the Collateral Agent hereunder, to the benefit of the
Collateral Agent and the Secured Parties and their respective
successors and assigns.

          (b)  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW
(EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW).

          (c)  Any legal action or proceeding with respect to
this Agreement and any action for enforcement of any judgment
in respect thereof may be brought in the courts of the State
of New York or of the United States of America for the
Southern District of New York and, by execution and delivery
of this Agreement, the Grantor hereby accepts for itself and
in respect of its property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any appeal thereof.  The Grantor
irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Grantor at its address specified for
notices in the Indenture.  The Grantor hereby irrevocably
waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement brought in
the courts referred to above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that
any such action or proceeding brought in any such court has
been brought in an inconvenient forum.  Nothing herein shall
affect the right of the Collateral Agent to serve process in
any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Grantor in any
other jurisdiction.

          20.  Waiver.  The Grantor hereby waives, to the
extent permitted by law, all rights of redemption,
appraisement, valuation, diligence, stay, extension,
moratorium and all right to have the Collateral marshaled upon
any foreclosure hereof, now or hereafter in force under any
applicable law in order to stay or delay the enforcement of
this Security Agreement, including the absolute sale of the
Collateral or any portion thereof, and the Grantor, for itself
and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such
laws and agrees that any court having jurisdiction to
foreclose this Agreement may order the sale of the Collateral
as an entirety.

          Without limiting the generality of the foregoing,
the Grantor hereby:  (i) authorizes the Collateral Agent and
the Secured Parties, in their sole discretion and without
notice to or demand upon the Grantor and without otherwise
affecting the obligations of the Grantor hereunder or in
respect of the Obligations, from time to time to take and hold
other collateral (in addition to the Collateral) for payment
of any Obligations, or any part thereof, and to exchange,
enforce or release such other collateral or any part thereof
and to accept and hold any endorsement or guarantee of payment
of the Obligations or any part thereof and to release or
substitute any endorser or guarantor or any other person
granting security for or in any other way obligated upon any
Obligations or any part thereof, and (ii) waives and releases
any and all right to require the Collateral Agent or any
Secured Party to collect any of the Obligations from any
specific item or items of the Collateral or from any other
party liable as guarantor or in any other manner in respect of
any of the Obligations or from any collateral (other than the
Collateral) for any of the Obligations.

          2l.  Termination and Reinstatement.

          (a)  This Agreement shall terminate on the Debt
Termination Date.  At the time of such termination or upon any
release of Collateral in accordance with the express
provisions of this Agreement (it being acknowledged by the
Grantor that any such release is permitted only to the extent
any such disposition of the Collateral is permitted under the
terms and provisions of this Agreement and all other Project
Documents), the Collateral Agent, at the request and expense
of the Grantor, will execute and deliver to the Grantor a
proper instrument or instruments acknowledging the
satisfaction and termination of this Agreement or, in the case
of a release of a portion of the Collateral, that such
Collateral is to be released from the Lien of this Agreement.
In the case of the termination of this Agreement as provided
above, the Collateral Agent will duly assign, transfer and
deliver at the Grantor's expense to the Grantor such of the
Collateral as has not yet theretofore been sold or otherwise
applied or released pursuant to this Agreement, together with
any moneys at the time held by the Collateral Agent pursuant
to this Agreement.

          (b)  This Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any
amount received by the Collateral Agent or any Secured Party
in respect of the Obligations is rescinded or must otherwise
be restored or returned by the Collateral Agent or such
Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Grantor or upon the
appointment of any intervenor or conservator of, or receiver
or similar official for, the Grantor or any substantial part
of its assets, or otherwise, all as though such payments had
not been made.

          (c)  The security interest created hereunder shall
be automatically released with respect to any portion of the
Collateral that is sold, transferred or otherwise disposed of
in accordance with the terms of the Indenture and the
Collateral Agent will, upon the request and at the expense of
the Grantor, execute and deliver such documents as the Grantor
shall reasonably request to evidence such release.

          22.  Security Interest Absolute.  All rights of the
Collateral Agent and security interests hereunder, and all
obligations of the Grantor hereunder, shall, subject to the
terms of this Agreement, be absolute and unconditional
irrespective of:

          (a)  any lack of validity or enforceability of the
     Indenture, any other Project Document or any other
     agreement or instrument relating thereto;
     
          (b)  any change in the time, manner or place of
     payment of, or in any other term of, all or any of the
     Obligations, or any other amendment or waiver of or any
     consent to any departure from the Indenture or any other
     Project Document;
     
          (c)  any exchange, release or non-perfection of any
     other collateral, or any release or amendment or waiver
     of or consent to departure from any guaranty, for all or
     any of the Obligations; or
     
          (d)  any other circumstance which might otherwise
     constitute a defense available to, or a discharge of, the
     Grantor, the Company or a third party surety or pledgor.
     
          23.  Payments Set Aside.  To the extent that the
Grantor or any other Person on behalf of the Grantor makes a
payment or payments to the Collateral Agent and/or any Secured
Party, or the Collateral Agent and/or any Secured Party
enforce their security interests or exercise their rights of
set-off, and such payment or payments or the proceeds of such
enforcement or set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a Collateral Agent,
receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then to the extent
of such recovery, the Obligations or any part thereof
originally intended to be satisfied, and this Agreement and
all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not
been made or such enforcement or set-off had not occurred.

          24.  Waiver of Jury Trial.  TO THE EXTENT PERMITTED
BY APPLICABLE LAW, EACH OF THE GRANTOR, THE COLLATERAL AGENT
AND EACH OF THE SECURED PARTIES HEREBY IRREVOCABLY WAIVES ALL
RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

          25.  Limitation of Liability.  Notwithstanding
anything to the contrary contained herein, the liability and
obligation of the Grantor or any past, present or future
partner, officer, director or stockholder of the Grantor under
or by reason of this Agreement shall be limited as provided in
Section 4.12 of the Intercreditor Agreement and the provisions
of said Section 4.12 are incorporated herein by reference.

          26.  Conflicts with the Intercreditor Agreement or
the Depositary Agreement.  Notwithstanding any other provision
hereof, in the event of any conflict between the terms of this
Agreement and the Intercreditor Agreement or the Depositary
Agreement, the provisions of the Intercreditor Agreement or
the Depositary Agreement, as the case may be, will apply.

          27.  Exculpatory Provisions; Reliance by Collateral
Agent.

          (a)  Neither the Collateral Agent nor any Secured
Party, nor any of their respective officers, employees,
servants, controlling persons, executives, directors, agents,
authorized representatives, attorneys-in-fact or affiliates,
shall be liable to the Grantor for any action taken or omitted
to be taken by it or them under or in connection with this
Agreement or any other Project Document to which the Grantor
is a party, or responsible in any manner to any Person for any
recital, statement, representation or warranty made by the
Grantor or any officer thereof contained in this Agreement or
any other Project Document to which the Grantor is a party or
in any certificate, report, statement or other document
referred to or provided for in, or received by the Collateral
Agent or any Secured Party under or in connection with, this
Agreement or any other Project Document to which the Grantor
is a party or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement
or any other Project Document to which the Grantor is a party
or for any failure of the Grantor to perform any of the
Obligations.  Neither the Collateral Agent nor any Secured
Party shall be under any obligation to any Person to ascertain
or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement
or any other Project Document to which the Grantor is a party,
or to inspect the properties or records of the Grantor.

          (b)  The Collateral Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without
limitation, counsel to the Grantor), independent accountants
and other experts selected by the Collateral Agent.  The
Collateral Agent shall have no obligation to any Person to act
or refrain from acting or exercising any of its rights under
this Agreement.

          IN WITNESS WHEREOF, each of the Grantor and the
Collateral Agent has caused this Security Agreement to be
executed by its duly authorized officer as of the date first
above written.

                          PANDA-ROSEMARY, L.P.,
                            a Delaware limited partnership
                          
                          
                          By:   Panda - Rosemary Corporation,
                               General Partner
                          
                          
                          
                          By:
                             Name:   Robert W. Carter
                             Title:  Chairman of the Board, 
                                       President and Chief
                                       Executive Officer
                          
                          
                          
                          FLEET NATIONAL BANK,
                            as Collateral Agent
                          
                          
                          By:
                             Name:    Kathy A. Larimore
                             Title:   Assistant Vice President
                          

                          SCHEDULE A
                               
                      ASSIGNED AGREEMENTS
                               
                               
          1.   Power Purchase and Operating Agreement, dated
as of January 24, 1989, as amended on October 24, 1989 and
July 30, 1993, between the Grantor and Virginia Electric and
Power Company.

          2.   Fuel Supply Management Agreement, effective as
of October 10, 1990, between the Grantor and Natural Gas
Clearinghouse, and any other contract entered into by the
Grantor to provide fuel management activities comparable to
those provided under such agreement.

          3.   Pipeline Operating Agreement, effective as of
February 14, 1990, as amended by Amendment Number 1, dated
May 7, 1990, and Amendment Number 2, dated November 19, 1991,
between the Grantor and North Carolina Natural Gas
Corporation.

          4.   Gas Purchase Contract, dated April 12, 1990 and
amended on April 23, 1993, between the Grantor and Natural Gas
Clearinghouse and any natural gas supply contract entered into
by the Grantor to supply natural gas to the Project as a part
of the Project's primary gas supply.

          5.   Lateral Line Interconnect and Reimbursement
Agreement, dated August 1, 1990, between the Grantor and
Transcontinental Gas Pipe Line Corporation.

          6.   Firm Gas Transportation Contract, dated
October 27, 1991, between the Grantor and Transcontinental Gas
Pipe Line Corporation.

          7.   Service Agreement for Services Under ITS Rate
Schedule, dated April 4, 1991, between the Grantor and
Columbia Gas Transmission Corporation.

          8.   ITS-1 Service Agreement, dated as of June 13,
1996, between the Grantor and Columbia Gulf Transmission
Company.

          9.   Amended and Restated Operation and Maintenance
Agreement, dated as of December 27, 1993, between the Grantor
and University Technical Services, Inc., as amended by the
First Amendment to Operation and Maintenance Agreement entered
into July 15, 1996, and any other operation and maintenance
agreement entered into by the Grantor that provides for
substantially all of the ordinary course operation and
maintenance services for the Project.

          10.  Cogeneration Energy Supply Agreement, dated
January 12, 1989, and amended on October 1, 1989 and
January 3, 1990, between the Grantor and The Bibb Company.

          11.  Real Property Lease and Easement Agreement,
dated as of June 9, 1989, between The Bibb Company and the
Grantor, as amended as of October 1, 1989, as of January 31,
1990, and as of March 15, 1996.

          12.  Service Agreement, dated October 22, 1991,
between the Grantor and Transcontinental Gas Pipe Line
Corporation.

          13.  Service Agreement, dated July 26, 1996, between
the Grantor and Transcontinental Gas Pipe Line Corporation and
the related agreements to be entered into by the Grantor with
Texas Gas Transmission Corporation and CNG Transmission
Corporation and any other transportation agreement entered
into by the Grantor.

          14.  Letter Agreement, dated March 6, 1991, between
the Grantor and Columbia Gas Transmission Corporation.

          15.  All Fuel Oil Contracts, Power Purchase
Agreements, Replacement Gas Contracts, Replacement Gas
Transportation Contracts, Gas Resale Contracts, Fuel Hedges,
Additional Contracts and Project Agreements, as those terms
are defined in the Indenture, entered into by the Grantor.

          
          
                          SCHEDULE B
                               
                UNIFORM COMMERCIAL CODE FILINGS
                               
                               
          1.   Halifax County, North Carolina.

          2.   Northampton County, North Carolina.

          3.   North Carolina Secretary of State.

          4.   Texas Secretary of State. 

Basic Info X:

Name: SECURITY AGREEMENT
Type: Security Agreement
Date: Oct. 18, 1996
Company: PANDA FUNDING CORP
State:

Other info:

Date:

  • July 31 , 1996
  • January 24 , 1989
  • October 24 , 1989
  • July 30 , 1993
  • October 10 , 1990
  • February 14 , 1990
  • May 7 , 1990
  • November 19 , 1991
  • April 12 , 1990
  • April 23 , 1993
  • August 1 , 1990
  • October 27 , 1991
  • April 4 , 1991
  • June 13 , 1996
  • December 27 , 1993
  • July 15 , 1996
  • January 12 , 1989
  • January 3 , 1990
  • June 9 , 1989
  • October 1 , 1989
  • January 31 , 1990
  • March 15 , 1996
  • October 22 , 1991
  • July 26 , 1996
  • March 6 , 1991

Organization:

  • Panda-Rosemary Funding Corporation
  • First Mortgage Bonds
  • Company and Fleet National Bank
  • Credit Bank Reimbursement Agreements
  • Credit Bank Working Capital Agreements
  • Collateral Agent and Fleet National Bank
  • Credit Bank Documents
  • LOC Security Agreement
  • The Bank of New York
  • Forward Security Agreement
  • United States Patent and Trademark Office
  • Interest Rate Protection Agreements
  • Foreign Exchange Protection Agreement
  • Grant of Security
  • Project Bank Deposits
  • Delivery of Collateral
  • Duties of Grantor
  • Collateral Agent of the Collateral
  • Panda-Rosemary Limited Partnership
  • Pledge of Instruments
  • b Maintenance of Records
  • Further Identification of Collateral
  • e Letters of Credit
  • Right of Inspection
  • Notice of Adverse Claims
  • Collateral Agent as Collateral
  • Maintenance of Properties
  • Modification of Terms of Accounts Receivable
  • Upon Event of Default
  • Duty of Collateral Agent in Respect of Collateral
  • Collateral Agent or Secured Party
  • Southern District of New York
  • Reliance by Collateral Agent
  • Virginia Electric and Power Company
  • Supply Management Agreement
  • North Carolina Natural Gas Corporation
  • Natural Gas Clearinghouse
  • Columbia Gulf Transmission Company
  • Restated Operation and Maintenance Agreement
  • University Technical Services , Inc.
  • First Amendment to Operation and Maintenance Agreement
  • Cogeneration Energy Supply Agreement
  • The Bibb Company
  • Transcontinental Gas Pipe Line Corporation
  • Texas Gas Transmission Corporation
  • CNG Transmission Corporation
  • Columbia Gas Transmission Corporation
  • Power Purchase Agreements
  • North Carolina Secretary of State
  • Texas Secretary of State

Location:

  • Roanoke Rapids
  • State of New York
  • N.A.
  • United States Patent
  • 4100 Spring Valley Road
  • Dallas
  • Texas
  • United States of America
  • L.P.
  • Delaware
  • Panda
  • Halifax County
  • Northampton County
  • North Carolina

Person:

  • Rosemary
  • Robert W. Carter
  • Kathy A. Larimore
  • Fuel Hedges

Percent:

  • 2 %